Ethereum is undergoing one of the most transformative phases in its history. With The Merge, the long-anticipated shift from proof-of-work (PoW) to proof-of-stake (PoS), finally on the horizon, and a robust roadmap for scaling and Layer 2 innovation unfolding, the network is poised to redefine its role as the backbone of decentralized applications. But what exactly do these changes mean? How will they impact performance, fees, and the broader blockchain ecosystem?
This guide breaks down Ethereum’s evolution into two core narratives: the consensus upgrade known as The Merge, and the ongoing battle to solve its scalability challenges through Rollups, sharding, and emerging Layer 2 technologies.
The Merge: Transitioning to Proof-of-Stake
From PoW to PoS: A Fundamental Shift
Ethereum currently operates on a proof-of-work (PoW) consensus mechanism, where miners compete to solve complex cryptographic puzzles to validate transactions and create new blocks. This process demands massive computational power—and by extension, enormous energy consumption.
To address environmental concerns and improve long-term sustainability, Ethereum is transitioning to proof-of-stake (PoS) via The Merge. In this new model, block validation is handled by validators who "stake" at least 32 ETH as collateral. These validators are randomly selected to propose and attest to new blocks, replacing energy-intensive mining with economic incentives.
👉 Discover how staking transforms blockchain security and rewards
The foundation for this change was laid in December 2020 with the launch of the Beacon Chain, an independent PoS chain that has been running parallel to the mainnet. The Merge will formally align the execution layer (current Ethereum mainnet) with the consensus layer (Beacon Chain), effectively ending PoW on Ethereum.
This transition doesn’t alter how transactions are executed—it only changes who validates them and how consensus is achieved. As a result, the core user experience remains unchanged in the short term.
What The Merge Does NOT Change: TPS and Gas Fees
A common misconception is that The Merge will drastically reduce transaction fees or boost speed. In reality, transactions per second (TPS) and gas fees will remain largely unaffected.
Why?
- Block size and block time are nearly identical: Post-merge, blocks will be produced every 12 seconds (slightly faster than the current ~13 seconds), but the amount of data each block can hold hasn’t increased.
- Execution layer unchanged: Transactions are still processed the same way. The computational load and network capacity haven't expanded.
- Gas limits unchanged: Following EIP-1559, Ethereum blocks have a base target of 15 million gas, with a maximum of 30 million. This constraint ensures decentralization by allowing ordinary nodes to verify blocks without requiring high-end hardware.
Since throughput hasn’t improved, supply remains tight while demand fluctuates—meaning gas prices will continue to be determined by market competition.
A Hidden Benefit: ETH Enters Mild Deflation
One of the most significant economic shifts post-Merge is Ethereum’s move toward mild deflation.
Currently, ETH has both inflationary and deflationary mechanisms:
- Inflation: Miners receive ~2 ETH per block, leading to an annual issuance rate of about 4.3%.
- Deflation: Since EIP-1559, base fees from every transaction are burned. This has removed millions of ETH from circulation annually.
Post-Merge, validator rewards will be significantly lower than miner rewards—estimated at around 90% less. With issuance dropping while burn rates remain steady (or increase with usage), Ethereum could see a net deflation rate of 1–2% per year under normal conditions.
This structural shift makes ETH increasingly scarce over time, potentially enhancing its value proposition as a digital asset.
Ethereum’s Scalability Challenge
Despite its dominance in decentralized finance (DeFi), non-fungible tokens (NFTs), and smart contracts, Ethereum suffers from limited scalability. Its current TPS ranges between 10–15, far below centralized systems like Visa (~24,000 TPS) or even competing blockchains like Solana (~1,000+ TPS).
High demand + low supply = expensive transactions. Users often pay several dollars—or even tens of dollars—to execute simple transfers or interact with dApps.
This bottleneck stems from the blockchain trilemma: the idea that a network can only optimize two out of three qualities—decentralization, security, and scalability—at once. Ethereum prioritizes decentralization and security, intentionally sacrificing raw performance to remain accessible and trustless.
But that doesn’t mean scaling isn’t possible. Ethereum’s solution? A dual-path strategy combining off-chain scaling (Layer 2) and future on-chain scaling (sharding).
Ethereum’s Scaling Roadmap: Rollups + Sharding
Layer 2 Solutions: The Rise of Rollups
While sharding remains years away, Layer 2 (L2) solutions are already live—and Rollups are leading the charge.
Rollups execute transactions off the main chain but post compressed transaction data back to Ethereum (Layer 1), inheriting its security. They fall into two main categories:
Optimistic Rollups
- Assume transactions are valid by default.
- Use a challenge period (typically 7 days) where fraud proofs can be submitted if malicious activity is detected.
- Fully compatible with the Ethereum Virtual Machine (EVM), making it easy for developers to port existing apps.
- Leading projects: Optimism, Arbitrum.
ZK-Rollups
- Use zero-knowledge proofs to mathematically verify every batch of transactions before posting to L1.
- No challenge period—finality is instant.
- More efficient in data compression, resulting in lower fees and higher throughput.
- Historically harder to integrate with EVM, though newer versions like zkSync Era and StarkNet are closing the gap.
- Leading projects: zkSync, StarkNet, Polygon zkEVM.
👉 Explore how Rollups are reducing fees while keeping assets secure
Other L2 approaches like State Channels, Sidechains, and Plasma exist but offer weaker security guarantees. For example:
- Sidechains (e.g., Polygon POS) rely on separate consensus mechanisms.
- Plasma chains suffer from the data availability problem, where full validation isn’t possible without trusting operators.
Rollups stand out because they publish all critical data on-chain, enabling full verifiability—a key requirement for true decentralization.
Sharding: Unlocking On-Chain Capacity
Even with Rollups, Ethereum’s ability to scale is capped by how much data Layer 1 can process. Enter sharding—a future upgrade designed to increase data availability directly on the mainnet.
Under the sharding design:
- The network will consist of a Beacon Chain plus 64 shard chains.
- Each shard produces data blobs every 12 seconds (~250KB each).
- Total potential throughput: ~1.3 MB/sec—about 17x current capacity.
Crucially, sharding uses two innovations to maintain decentralization:
- Random validator committees: Small groups of validators are randomly assigned to verify each shard block, preventing coordinated attacks unless an adversary controls over 1/3 of all staked ETH.
- Data availability sampling: Nodes only need to download small random portions of shard data to confirm validity, rather than storing everything.
When combined with Rollups, sharding could allow Rollup transactions to post data more cheaply and frequently—unlocking massive scalability gains.
However, sharding is not expected before 2025 at the earliest. Until then, Rollups remain the primary scaling vehicle.
Top Layer 2 Projects in 2025
Four L2 platforms dominate today’s landscape:
| Project | Type | EVM Compatible | Key Advantage |
|---|---|---|---|
| Arbitrum | Optimistic Rollup | Yes | Mature ecosystem, highest TVL |
| Optimism | Optimistic Rollup | Yes | Strong developer support, OP token launched |
| zkSync | ZK-Rollup | Yes (zkEVM) | Low fees, fast finality |
| StarkNet | ZK-Rollup | Yes (Cairo VM) | High throughput, scalable architecture |
While OP-Rollups lead in adoption due to EVM compatibility, ZK-Rollups offer superior efficiency. As ZK technology matures—especially with native EVM support—we may see a shift in momentum toward ZK-centric ecosystems.
Frequently Asked Questions
Q: Does The Merge make Ethereum faster?
A: No. While block production becomes slightly more regular (every 12 seconds), transaction speed and capacity remain unchanged because the execution layer is unmodified.
Q: Will gas fees drop after The Merge?
A: Not directly. Fees depend on network demand versus block space. Since neither changes post-Merge, fee levels will stay volatile based on usage spikes.
Q: Are Layer 2 networks safe?
A: Rollups like Arbitrum and zkSync are highly secure because they publish all data on Ethereum and inherit its consensus security. Avoid solutions that don’t post full transaction data on-chain.
Q: What happens to miners after The Merge?
A: PoW mining on Ethereum ends. Miners must either switch to other PoW chains (like Ethereum Classic) or exit the ecosystem entirely.
Q: Can Rollups work without sharding?
A: Yes—they already do. However, sharding will dramatically reduce data posting costs for Rollups, enabling even greater scalability in the future.
Q: Is ZK-Rollup better than Optimistic Rollup?
A: ZK-Rollups offer faster finality and lower fees but are more complex to build on. Optimistic Rollups currently lead in developer adoption due to EVM compatibility. Both have roles to play.
Final Thoughts
Ethereum’s journey is far from over. The Merge marks a pivotal step toward sustainability and economic refinement—but it's just the beginning.
The real transformation lies ahead: a world powered by ZK-Rollups, enhanced by sharding, and driven by a thriving multi-layered ecosystem. Together, these advancements aim to scale Ethereum to support global applications without compromising decentralization or security.
As adoption grows and technology evolves, staying informed—and involved—is essential. Whether you're staking ETH or building on Layer 2s, you're part of shaping the next era of web3.
👉 Stay ahead in the evolving Ethereum ecosystem with real-time insights